Paragon Mortgages _ Do Not Panic _ On BBC

Following the announcement yesterday by the UK's third largest 'Buy to Let' mortgage lender, Paragon Mortgages, that it may have to scale down lending operations, Ashley Clark, Director of , this morning was interviewed on BBC radio for comment.

Clark suggested that "the public should not panic".  He stated: "Paragon has made record profits this year with excellent returns for shareholders".  He advised that the impact of the so called "credit crunch" mean't that wholesale lenders, the people who mortgage companies borrow money from, were not lending at competitive rates across the board and we should expect more instances of mortgage lenders looking at how they finance their short term cashflows. "

On the question of a "run" on a bank, Clark suggested that "there will be no run on Paragon as they have no cash deposit investors, but there may be more trouble ahead for some high street Bank and Building Society lenders that do use their investors short term savings deposits, like Northern Rock, as part of their cashflow management for lending.

What should you do?

Clark advises that none of us should have more than £35,000 deposited in any one bank as this is the maximum compensation that would be paid on insolvency. 

In addition, be aware that sensationalism by journalists is causing much of the problem.  Clarks adds: "in one newspaper there was a headline yesterday 'Paragon Crashes', this is simply not true and creates panic when there is no need".

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